If Sony thought it was being clever with its alliwantforxmasisapsp blog, the idea badly backfired. Presumably written by a couple of hip gamers addicted to the PSP, the blog was actually the brain child of a marketing agency hired by Sony. The blogging community wasted no time calling Sony on its deceptive manoeuvre. In this case, the bloggers were a complete fabrication. But many marketers use real people - co-workers, relatives or strangers on the streets or on the Net - to push their products on mostly unsuspecting consumers. “There is nothing legitimate about word-of-mouth marketing,” says Gary Ruskin, executive director of Commercial Alert, a nonprofit consumer group which wrote to the Federal Trade Commission to complain about the practice back in October 2005.

“There is a legal issue: shills should disclose that they are shills. But there is also a social issue because it is a commercialization of human relationships and an assault on social trust in our society,” Ruskin believes.

When the FTC responded in late 2006, it said in essence that word-of-mouth advertising was already covered under FTC regulations about commercial endorsements and did not warrant any new regulations. However, the agency agreed that there was indeed a problem if the relationship between the marketer and the “sponsored consumer” was not disclosed.

The FTC has promised to investigate and go after violators on a case-by-case basis. As a matter of policy, FTC spokesperson Jackie Dizdul would not say if investigations were currently under way.

The Word-of-Mouth Marketing Association, a trade association created in 2004, draws a line between objectionable stealth marketing and legitimate buzz marketing. “The main difference is disclosure. If you don’t disclose the relationship, it is stealth marketing,” said a staffer at the association’s headquarters in Chicago. Its web site offers a checklist of questions to identify and prevent stealth marketing.

“According to a survey in Inc. Magazine, 82% of Inc. 500 companies declare that they use word-of-mouth marketing. One of our goals is to start research to get figures about this field and how much money it generates,” added the WOMMA staffer.

Less than two weeks after the FTC published its response, PayPerPost announced it was stepping up its disclosure policies. PayPerPost is a marketplace that connects marketers with bloggers who agree to speak about products or services for a fee. While word-of-mouth marketing takes place both offline and online, the Internet is giving “sponsored consumers” an even greater reach.

One can easily see why marketers are so taken by word-of-mouth marketing: influential consumers become powerful spokespeople and salespeople. But if the link between the marketer and “sponsored consumer” is not revealed, trust and credibility are in danger.

Gary Ruskin is now lobbying to get the issue in front of the new Congress. “Congress should hold hearings on this practice because, even with disclosure, it causes social damage,” he insists.